Collaborative Contracts: How to Integrate the Knowledge of Your AEC Teams
Jeff Sample
Posted: September 23, 2022 | Project Management
By Jeff Sample
Successful large-scale builds require careful planning and knowledgeable insights from all stakeholders. While a small project can thrive under the direction of one leader (usually the contractor), larger projects lean heavily on feedback from architecture, engineering, and construction (AEC) teams to ensure they’re delivered on time and within budget.
Of course, more hands-on involvement across project specialties means a greater need for collaboration, transparency, accountability, and data-informed decisionmaking. Therefore, project leaders and build teams must utilize the available resources to ensure they’re constantly meeting customer demands.
Simply put, we must change our processes to meet changing contracts and delivery methods.
1. Commonly Used Contract Methods
There are many types of construction contracts a builder and client may choose to utilize. Ultimately, the project scope and owner preferences will determine the agreement best suited for both parties. Still, it’s essential to understand the advantages and disadvantages of some of the most used contracts.
Design-Build
Often, builders and designers will map out a project proposal before addressing costs with an owner, leading to two separate negotiations that can make the preconstruction process more drawn out and complicated. A design-build contract, however, addresses both design and cost at once, offering a more comprehensive proposal right from the start.
In a design-build contract, construction typically starts before finalizing the contract. Designers work with the owner to determine the budget and timeline, designing the project to fit within the desired scope. In doing so, you can avoid the preferential disputes that commonly arise between designers and builders, creating a more naturally collaborative environment that allows for faster project delivery and higher-quality outcomes.
In many instances, outside influences such as material sourcing, supply chain issues, or labor shortages can create unforeseen obstacles for design-build contracts. Often, the drawbacks result in greater costs for the owners or unfulfilled design preferences. Maintaining open, transparent communication with build teams and owners is critical. This prevents unnecessary cost negotiations and interpersonal tensions when seeking payment.
Construction Management At-Risk (CMAR)
CMAR contracts—sometimes called guaranteed maximum price (GMP) contracts—specify a maximum amount the owner will have to pay. If and when the project exceeds the budget, the contractor must cover the cost. This limits the cost-risk for the customer, but increases it for the contractor and building teams.
Of course, CMAR contracts prioritize estimations to eliminate the likelihood of exceeding the agreed-upon budget. For owners with less financial flexibility, they offer a virtually risk-free project, which can be crucial for building trusting client relationships.
Project managers using CMAR must be careful in their estimations to ensure a profitable end project. When drafting a CMAR project, you must tap into historical data to better evaluate probable costs. Additionally, you’ll need to perfect your forecasting methods and have a deep understanding of industry fluctuations to avoid unforeseen costs.
Integrated Project Delivery (IPD)
IPD contracts fully integrate project teams, leveraging the knowledge and experience of all stakeholders to maximize the project’s potential. They are multi-party agreements between designers, builders, owners, and subcontractors, spreading both risk and reward between all parties. In doing so, each stakeholder has a greater incentive to deliver projects on time and within budget to ensure profitable outcomes.
Above all else, IPD contracts bring a sense of collaboration and accountability to project teams. They have the potential to empower laborers of every skill level and specialty, promoting a sense of ownership and teamwork that is crucial for project success.
IPD contracts are relatively new in the industry, so project managers with long-standing success using other methods may be hesitant to use them. However, as construction technology improves collaboration and decision-making in the field, IPD contracts are likely to become more popular.
2. Internal Standards for Success: How to Integrate AEC Teams in Every Project
As the construction industry continues to evolve in response to the nation’s changing infrastructure and consumer demands, construction managers must adapt their practices and processes to serve their clients best. Regardless of what style of contract best serves your client and project, it’s imperative to help your AEC teams tap into their experiential knowledge to avoid costly pitfalls that could otherwise be avoided.
You can deliver better projects and improve your contracting methods by setting internal standards for success that center on collaboration, transparency, accountability, and data-informed decisions.
Collaboration
Cross-team collaboration is a critical component of successful project management. It allows for higher profits, less wasted material, fewer reworks, and more accurate timelines. Construction management software that prioritizes collaboration can help streamline your communication with all stakeholders while giving everyone a centralized hub to ask and answer questions, update project progress, and make more informed decisions.
When writing contracts, it’s crucial to outline the anticipated responsibilities of your given AEC teams. But before you delegate, get a sense of their past experience and future capabilities. Though it seems like a lot of legwork upfront, it could save both you and your clients valuable time and money in the long run. Plus, full integration of AEC teams makes for a more empowered team throughout the life of the project.
Transparency
When dealing with large contracts and costly builds, transparency must be a top priority for all involved. Open, honest communication and feedback are critical for building healthy relationships between contractors and owners. What’s more, it can drastically improve morale among your AEC teams, creating a stronger sense of ownership and accountability for every employee.
Accountability
When designers, builders, contractors, and owners all have their hands in a project, it can be challenging to track decisions and fully understand where your successes and failures are. However, you can better understand how your projects evolve by utilizing collaborative software to make changes and gauge decision impacts.
AEC teams can access cloud-based software to update the rest of the project’s stakeholders on progress. By setting benchmarks and continually communicating new developments, you can ensure your teams are on track and working cohesively. Doing so empowers AEC teams to work more efficiently and improves collaboration from top to bottom.
Data-Informed Decisions
Our reliance on stagnant processes often creates costly project pitfalls. However, construction planning software that puts historical data front and center can provide more accurate estimates of how decisions will impact a project and can drastically improve the likelihood of a project’s delivery time and budget.
Keep in mind that many software platforms can “see” what you sometimes can’t. With so many moving parts, the extra set of eyes software can provide is critical for accurate delivery. Additionally, active AEC teams that diligently chart progress and update benchmarks contribute to the historical data necessary for future decision-making. Therefore, it’s beneficial to have a collaborative platform that’s accessible to major stakeholders.
Smart Contracts: The Key to Project Success
As software developers continue to enhance what’s possible in construction, it’s critical that project managers, owners, and AEC teams utilize the available resources to improve their practices at every turn. Most notably, the use of software to draft more accurate estimates and write more comprehensive contracts is essential for continued success in the field.
Stay on top of your game and at the forefront of the industry by using the latest and most user-friendly and focused tech available to you and your teams.
About the Author: Jeff Sample has devoted the past 20+ years to transforming companies. Jeff optimizes companies throughout the construction industry by designing solutions, optimizing strategic advantages, and breaking down information silos. His passion for outdoor adventure and Ironman competitions garnered him the moniker “The Ironman of IT”.
As Industry Evangelist for Join, Jeff promotes collaboration and the transformation of preconstruction to help project teams reach their potential. His depth of IT experience in various industries and his passion for continuous improvement have made Jeff a popular speaker and vocal thought leader in construction, spending much of his time educating on multiple topics to better the industry as a whole.
For more information about reaching your company’s preconstruction potential, visit join.build.
Article appearing in Sep/Oct 2022 DCD magazine.